Words From The Efficiency Experts

The Rise of Bank Mergers

Posted by Jacob McDaniel on Thu, Aug 1, 2019
Jacob McDaniel

M&A-1

A trend on the rise in community banking is that of bank mergers and acquisitions (M&A's). The number of M&A's has increased almost every year since 2011, growing exponentially over the past few years. A staggering 4.6 percent of all banks exited the industry through mergers and acquisitions in 2018 alone.1

The fourth largest bank merger in history is set to occur this year between BB&T and SunTrust Bank. This will be the largest merger since the financial crisis in 2008. Directly following the financial crisis, the number of bank mergers plummeted due to weaknesses in the industry and completely halted until 2011.

However, in the years since, mergers and acquisitions of banks have been on the rise. It seems that the merger of BB&T and SunTrust Bank is a sign of the ever-increasing environment of eat or be eaten in the banking industry. After the merger, the two banks will re-brand under the name “Truist Bank”. Truist Bank will hold over 3 percent of the total assets in the banking industry if approved. This vast amount of assets leads some in congress and in federal positions to question whether the danger of creating this large of a bank outweighs any of the potential benefits.

Mergers like this one are happening on a much smaller scale across the country. In 2014 there were 307 mergers and acquisitions, with the average size of the selling bank being $493 million.1  In 2018, the number of mergers dropped to 262 and the average size of the selling bank grew to 651 million.1 This means that larger banks are considering these mergers and acquisitions and it looks like this trend will continue upward. We could very well see in the coming years this number of the average size of the selling bank creep up to the billion-dollar mark as it becomes more commonplace for these larger banks to merge together.   

Sources:

  1. https://bankbclp.com/2019/01/2018-bank-ma-statistics/
  2. Photo Credit: rawpixel.com from Pexels, edits by Rachael Carter

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